Monday, July 18, 2022

Burden on the Merits in Summary Trial

Mud Engineering Inc v Secure Energy (Drilling Services) Inc 2022 FC 943 St-Louis J

            2,635,300 / 2,725,190 / Drilling fluid

The most significant aspect of this decision, dismissing Mud Engineering’s action on a summary trial, is the discussion of the the burden of proof in a summary trial. The result on the facts turned on lack of evidence, with the strange result that the action was dismissed because the listed inventor was not proven to be the inventor, but at the same time no one else was held to be the inventor, and there was no order to vary the record, so the result is that the 300 patent is an invention without an inventor.

Mud Engineering is the listed owner of both disputed patents and Mr Wu, the founder of Mud, is the sole listed inventor on the 300 patent and the co-inventor on the 190 patent [57]. Before founding Mud, Wu had worked for Secure’s predecessor and had invented or co-invented some related technology that is the subject of its own patents or applications owned by Secure (see eg 2,451,585). When Mud brought this infringement action against Secure, Secure argued that Secure, not Mud, is the rightful owner of the patents, [9] on the basis that Mr Wu had actually invented or co-invented the inventions when he worked at Secure’s predecessor. There was very little evidence on either side as to how the disputed patents had been developed, so the burden of proof was a major issue.

Everyone agreed [18], and it is now established, that the party seeking summary trial bears the burden of demonstrating that summary trial is appropriate: see also ViiV FC 2020 FC 486 [19]. The main question in this case was as to the burden on the merits of a summary trial issue, once it has been determined that summary trial is appropriate.

The question of burden of proof in a summary trial was addressed, albeit briefly, by Manson J in ViiV FC 2020 FC 486, where he said:

[20] On the merits of the summary trial issue, the usual burden in a civil trial applies, that is, the “party making an assertion must prove it by relevant evidence and the application of appropriate law” (Teva Canada [2011 FC 1169] at para 36). In this case, [the defendant] asserts that [its product] does not fall within the scope of claims 1, 11, and 16 of the 282 Patent, and thus bears the burden of proving non-infringement.

Consequently, while the usual burden lies on the patentee to prove infringement, that burden was reversed in ViiV because of the way the issue had been raised in a summary trial.

Subsequently, in Janssen v Pharmascience 2022 FC 62, after much fuller consideration of the issue and the relevant caselaw, Manson J held expressly that his holding on this point in ViiV was wrong ([55]), and the burden in a summary trial is the same as in underlying action:

[57] [W]hile on a motion for summary trial, the burden is on the moving party to demonstrate that a summary trial is appropriate, once the onus of the merits of the matter, in terms of either infringement or validity, are before the Court for determination, the burden and onus of proof of the underlying action applies.

Nonetheless, in this decision, St-Louis J held that she should follow Manson J’s decision in ViiV, not Janssen, on the basis that Manson J’s holding on the issue had been affirmed by the FCA in ViiV FCA 2021 FCA 122 [44], and she was bound by the FCA decision: [26], [28].

This would all make sense if ViiV FCA was released after Janssen. But ViiV FCA was released seven months before Manson J decided Janssen. So why didn’t Manson J also follow his own prior decision in ViiV, on the basis that he was bound by the FCA decision? One possibility, that is implicit in St-Louis J’s decision, is that this specific point simply wasn’t argued in Janssen. It is a bit odd that neither counsel nor Manson J himself recognized that the point had been decided, especially ViiV FCA was considered on the summary judgment standard generally, with Manson J even quoting a nearby passage from ViiV FCA: see Janssen [33], quoting ViiV FCA [42].

The other possibility is that Manson J and the parties in Janssen did not conisder ViiV FCA to have settled the point. The passage that St-Louis J considered to have affirmed Manson J’s ViiV decision is this:

[44] ViiV contends that the Federal Court ignored the issue of onus of proof. I disagree: see 2020 FC 486 at paras. 19-22.

The cited paragraphs included ViiV FC [20], where Manson J articulated the burden that he subsequently repudiated in Janssen. However, it also includes ViiV FC [19], where Manson J held that the party seeking summary trial bears the burden of demonstrating that summary trial is appropriate. In ViiV FCA at [43], the FCA outlined ViiV’s argument that Manson J had erred in finding that a summary trial was appropriate. Arguably “the issue of the onus of proof” adverted to in the next paragraph is the issue of the onus of establishing that a summary trial is appropriate, not the separate issue of who bears the onus on the merits in a summary trial. That would explain why neither Manson J nor counsel in Janssen considered ViiV FCA to have settled the latter point.

With that said, the FCA in ViiV did refer to the entire passage, which includes the crucial [20]. On the other hand, the FCA did not specifically approve everything in that passage as being correct in law, but rather referred to it to say that Manson J had not ignored the onus of proof.

I’ll also point out that the issue of onus often doesn’t matter; in fact, it ultimately did not matter in either ViiV, or in Janssen, or, as I understand it, in this case. In ViiV, while Manson J did hold that the burden lay on the defendant to prove non-infringement, reversing the usual burden, infringement turned entirely on claim construction [21], which is a question of law for the court. Manson J decided that without any presumption except that the plaintiff / patentee bears the burden of proving non-essentiality of any element [22] — which is the same presumption as in the underlying action: Free World 2000 SCC 66 [57]. In Janssen the onus didn’t make any difference on the facts [62].

Further, the burden will not matter in a case in which there is an applicable presumption. The ViiV position is that the “party making an assertion must prove it by relevant evidence and the application of appropriate law”; the Janssen position is that “the burden and onus of proof of the underlying action applies.” The “appropriate law” under the ViiV position includes any presumption, such as the presumption of validity in s 43(2).

There is a parallel with the burden issue under the old NOC regs, where the point was well developed. The patentee responding to an NOA was the applicant, and as such bore the burden of establishing that none of the allegations, including any allegation of invalidity, are justified: Pfizer v Apotex 2007 FCA 209 [107]; in effect, the applicant must prove validity. The applicant / patentee could rely on the statutory presumption of validity to meet this burden: Pfizer v Apotex 2007 FCA 209 [109]. The burden would then shift to the generic to adduce evidence of invalidity, or validity would be established on the basis of the presumption alone. To discharge its burden, the generic must adduce sufficient evidence “on a balance of probabilities” and once it has done so, the first person must disprove the allegation, also on the balance of probabilities: Pfizer v Apotex 2007 FCA 209 [110]. That is, once the second person has adduced evidence sufficient to displace the presumption, the presumption “is no longer relevant” and the matter is decided in light of the evidence adduced by the parties: Pfizer v Apotex 2007 FCA 209 [110]; see also Pfizer Canada Inc v Novopharm Ltd 2008 FC 11 [32] “If both parties lead evidence, the Court will weigh all the evidence and determine the matter on the usual civil balance.” In this sense the presumption of validity is weak; it suffices to establish validity only in the absence of relevant evidence adduced by the generic.

Similarly, under the ViiV approach to a summary trial, if the moving party is a patentee making an assertion of validity, the patentee must prove it, but can take advantage of the presumption of validity. This is no different than under the Janssen approach, since a patentee in an action can of course also rely on the presumption of validity. This means that a party attacking the validity of a patent bears the burden of proving invalidity under either ViiV or Janssen.

It seems to me that for the same reason, the burden didn’t matter in this case either. The question was ownership. Pursuant to the ViiV rule, applied by St-Louis J, the burden lay with the party making an allegation to prove it on the balance of probabilities. Since Mud alleged ownership, it bore the burden of proving ownership [90]. But the parties agreed, and St-Louis J held, that there is a weak presumption pursuant to s 43(2) that the registered owner is the owner [64], [81], [89]. Mud was able to rely on this presumption, though St-Louis J held on the facts that it had been rebutted [89]. With the presumption rebutted, it seems to me that we would be in the same situation as in an NOC case where the generic has adduced sufficient evidence to rebut the presumption of validity, which is to say that the matter is to be decided on the balance of probabilities in light of the evidence adduced by both parties.

St-Louis J nonetheless indicated that the burden did matter, and indeed that it was “dispositive” [35]. After having held that Secure had presented “some evidence” which was sufficient to displace the presumption that the named inventor is the true inventor [89], she continued:

[90] Since the presumption is rebutted, the party making an allegation holds the burden to prove it on balance of probabilities. As Mud made an allegation of ownership of the Disputed Patents on this Motion for summary trial, seeking a declaration from the Court in that regard, they must prove their allegations. The parties agreed that, to establish that Mud is the proper owner of the Disputed Patents, they had to establish that Mr. Wu, name as the inventor, invented what he claims.

St-Louis J then reviewed the evidence adduced by Mud, and decided it was not sufficient to establish that Wu had invented the patented technology, and hence Mud had not carried its burden [93].

St-Louis J seems to have treated the evidence adduced by Secure as going only to rebutting the presumption of ownership, and not to the merits of whether Wu was the inventor. That is why, in her view, the burden mattered.

But the view that the evidence adduced to rebut the presumption does not go to the merits is contrary to  the approach taken in the NOC cases, in which it is very clear that the evidence that displaces the burden is also considered in the subsequent analysis on the merits.

Further, an important point is that, as I understand it, evidence sufficient to displace the presumption of validity is also sufficient to establish invalidity on the balance of probabilities, in the absence of any evidence adduced by the applicant. As the FCA explained in Pfizer v Apotex 2007 FCA 209 [105] quoting Bayer Inc.v Apotex Inc (2000) 6 CPR(4th) 285 (FCA) [9]:

[9] The operation of the statutory presumption in the face of evidence of invalidity depends upon the strength of the evidence. If the evidence proves on a balance of probabilities that the patent is invalid, the presumption is rebutted and is no longer relevant: Diversified Products Corp. v. Tye-Sil Corp. (1991), 35 C.P.R. (3d) 350 (F.C.A.) at 359. (Bayer at paras. 6, 9)

The FCA in Pfizer v Apotex repeated this passage for emphasis at [110]. It made the same point at [107] quoting Aventis Pharma v Apotex 2006 FCA 64 [78]–[79]:

[78] Relying upon the presumption of validity, [the patentee] can thus meet its initial burden merely by proving the existence of the patent.

[79] Once this is done, the burden shifts to [the generic] to establish that the patent is invalid. The standard of proof that [the generic] is required to satisfy is that of a balance of probabilities [citing Bayer [9]]

In this case, evidence was adduced by Secure and accepted by St-Louis J, to the effect that “Mr. Wu did not invent the broad scope of subject matter claimed in the Disputed Patents” [83]. Under the approach taken in the NOC cases, this evidence, being sufficient to rebut the presumption, would also be sufficient to establish that Wu was not the inventor on the balance of probabilities, in the absence of evidence to the contrary. It is clear that St-Louis J considered the evidence of inventorship adduced by Mud to be weak. Under the NOC approach, the presumption, having been rebutted, was no longer relevant, and the evidence adduced by Secure, and not countered by Mud, was sufficient to establish that Wu was not the owner on the balance of probabilities. Thus, it seems to me that the question of the burden of proof in a summary trial ultimately did not matter, assuming that the approach to burden shifting in the NOC proceedings also applies in a summary trial.

The point of all this is that the question of burden did not matter in ViiV, in Janssen, or in this case. (This is not to suggest it never matters; for example, it would matter in a case in which infringement turned on the facts, rather than on claim construction.)

In the end, this is a tricky question of binding precedent. I can understand why St-Louis J felt she was bound by ViiV FCA on this point, but I don’t think that this passing and somewhat ambiguous reference, that was clearly not fully considered at either level in ViiV, can be considered to have settled a point of principle, particularly as the point was not determinative. As I see it, this point remains open.

To return briefly to the facts, the invention was drilling fluid. There was very little evidence of Wu’s involvement in the development of the technology [98]. The evidence of Secure’s expert that led St-Louis J to conclude that Wu had not invented the claimed subject-matter was that the claimed drilling fluid, was strikingly similar to the drilling fluid subject matter of the 585 patent (not in dispute), developed by Wu and a co-inventor while he was at Secure’s predecessor [100]. St-Louis J held that in order to establish that Wu was the inventor, Mud would have to establish that the drilling fluids of the disputed patents were “completely different” from those Wu worked on while at Secure’s predcessor [101], and Mud had failed to carry that burden [105]. (I must say that I am inclined to agree with Mud [133] that this is a validity argument in the guise of an ownership argument.) At the same time, Secure failed to establish that its employees, other than Wu, were the true inventors of the disputed patents [138]–[139]. The result of St-Louis J’s decision is that the 300 patent is an invention without an inventor, at least for the purposes of this proceeding. At the same time, there does not appear to have been any order to vary the records under s 52, so presumably Wu will remain as the listed inventor. There are going to be some interesting estoppel / abuse of process arguments if Mud ever tries to assert these patents against another party.

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